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Cape Town - The rand lost more than 1.5% against the US dollar on Wednesday, breaking through the level of R13.50/$ for the first time in almost three months as the greenback rallied on rate hike hopes.
Emerging markets felt the brunt of Fed chairperson Janet Yellen's hawkish comments on Tuesday, with the rand, Turkish lira and Mexican peso coming under massive pressure, according to TreasuryOne.
"We've seen the USD really on the front foot. This comes after comments made by Janet Yellen, that the economy is strong enough so that the US doesn't have to hike gradually. This has put the odds of a hike in December above 70%," TreasuryOne dealer Wichard Cilliers told Fin24 on WhatsApp.
RMB currency strategist John Cairns corroborated this, saying Yellen's comments that it “would be imprudent to keep monetary policy on hold until inflation is back to 2%" have caused the market to price in a 76% chance of an interest rate hike in December.
On the local front, trade federation Cosatu is turning up the heat in the fight against corruption with a nationwide strike involving hundreds of thousands of workers.
Cosatu, which helped President Jacob Zuma win control of the ruling ANC in 2007, turned against the beleaguered president after he fired Pravin Gordhan as finance minister in a midnight Cabinet reshuffle at the end of March.
This move, which prompted rating agencies Standard and Poor's and Fitch to downgrade South Africa's credit rating to junk, sent the rand spiralling over R14/$ from R12.31$ before Gordhan was recalled from an investor roadshow in the UK a few days before his axing.
The deterioration in South Africa's institutional strength, a key issue also for rating agencies, was reflected in the country's 14-point drop in the World Economic Forum’s Competitiveness Index released on Wednesday.
By 12:05 the local unit was trading 1.14% weaker at R13.52 to the greenback from an overnight close of R13.37 and from an intra-day low of R13.56.
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